Elan, the pharmaceutical company that is part-based in Ireland has had a colourful few years. It’s share price was up around 70Euro about five years ago and now it is worth about 10 Euro, having been worth less than one Euro at one point.
Soe of their troubles can be traced to some funny accountancy practices that I cannot understand and some of them are based on their line of business.
You see, Elan are trying to make new drugs. This is a very risky business sometimes and it is a very profitable business sometimes.
If you are an investor, then pharmaceuticals can be very resistant to recessions - people get sick irrespective of the economic climate and they will spend money on their health, even though they are cutting back on holidays and cars.
However, the two big problems for a drug company are (1) you might not find the new drug you are chasing and (2) the new drug might have unpleasant side-effects.
Leaving aside the first problem, which is usually solved by having a really good discovery pipeline, the second one is the big problem.
The process goes like this. You find a compound and you test it on a bunch of cells in the lab - if you are Elan, this bunch of cells will mimic the blood-brain barrier, because they are trying to deliver drugs to the brain to treat MS/Alzheimer’s etc.
If it works well on the bunch of cells, you might try it out on a model animal - say a mouse or rat.
If it works well on the animal, you nmight try it out one a small number of humans (say half a dozen).
If it works well on a small number of humans, you might try it out on a large number of humans (say 1,000).
If it works well on the large number of humans, you apply for approval from the regulator and then you start selling.
At this point, your share price begins to climb.
It might climb a lot.
You have 35,000 customers.
Your share price climbs even more.
You begin to plan on starting a new discovery process for more beneficial drugs.
Then two people in 35,000 become ill.
Your share price bombs. Banks won’t lend you money. You have to let employees go, etc.
Now the point I am making here is that all (most of) the new drugs that are being made are high risk. They are often pretty nasty and they would not be taken unless it was absolutely necessary. Lots of cancer treatments involve large-scale destruction of good tissues in order to destroy the bad ones. You wouldn’t do that unless you had to.
However, the likelihood of future develkopment of drugs is linked to the success of today’s drugs. Adverse reactions are common. While it is awful for the families of those who become ill as a result of taking a compound, there is now a need to licence more compounds with higher elements of risk. Let the patient decide. Tell the patient how many people became ill as a result of taking the compound.
Right now, the regulators will pull a compound if they feel it presents a significant risk. They make the decisions for the patient. This has its good points, but also, it has its bad points and it removes choice for people that otherwise would have taken the high-risk treatment.
Allowing more compounds onto the market is fraught with danger, but also it would mean that there is more incentive to make new treatments and ultimately, this should save more lives.
Comments welcome.
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6 users commented in " The danger for drug makers. "
Follow-up comment rss or Leave a TrackbackJames,
It seems that you are telling the story of Tysabri. I would have thought that this story is an example of how sensible action on the part of both company and regulator has seen a drug with extreme (if rare) side effects retain its licence.
From wikipedia:
Natalizumab (Tysabri) was approved for treatment of multiple sclerosis in 2004, through the FDA’s accelerated Fast Track program, due to the drug’s efficacy in one-year clinical trials. In February 2005, four months after its approval, natalizumab was withdrawn voluntarily by the manufacturer after two cases of progressive multifocal leukoencephalopathy. ….In June, 2006, …the FDA re-approved natalizumab for patients with all relapsing forms of MS. Patients taking natalizumab must enter into a registry for monitoring.
Sounds like sensible action all round?
Are you saying that this level of regulation has been too strict?
I think I am saying that the level of regulation has been too strict. It will always be the case that when you talk about lighter regulation of drugs, people will point to Thalidomide and indeed, Thalidomide was a terrible situation (it is still available), so we must be careful. However, the sensible way forward for me is to make more drugs available, try to be as clear as possible that there may be side effects, describe them, but ultimately let the patient have more of a say in whether they want it or not (this would have to be coupled with a ban on direct marketing of a drug to a patient by a retailer).
So, yes, I think we need to relax the regulation a bit.
James,
You used the example of Tysabri. Could you tell us how you would have liked the regulatory agencies to have acted differently in this case?
Or can you give another case where the the regulatory agencies should have acted differently?
I agree with James. In the current regulatory climate penicillin would have a very hard time passing EU and FDA rules due to it being the most highly reported allergic drug available. Yet it has had a huge positive impact on the treatment of infectious diseases.
Overly strict and ever increasing regulations are making it prohibitively expensive for most companies to bring drugs from benchtop to bedside. Hence the recent closures of most of the antimicrobial development divisions in the top biopharma companies despite rising antimicrobial resistance levels in bacteria causing infections.
Clearly its not just the regulatory people causing the problem but also companies and shareholders looking for ever increasing profit margins. Hopefully they can meet in the middle and address these issues.
Hi Ray - it seemed to me at the time that even though Tysabri was ‘voluntarily’ withdrawn, this seemed to be putting a drug with enormous potential in doubt. Drugs like Tysabri don’t seem to be coming along very often and withdrawing the drug seemed to me to be a bit drastic, rather than saying “look, this drug has some real dangers” and then letting the medic and patient decide (which is what is happening now).
The long view is that if the likelihood of a drug being pulled is high, then the incentive for pharmaceutical companies to continue developing the drugs will get lower.
As madnessburgers said, drugs like asprin would not now make it onto the market. Perhaps paracetamol wouldn’t either. However, the fact that they are being left on the market seems sensible to me. Let people know the dangers and take the appropriate measures.
Merck pulled VIOXX in 2004, resulting in multi-billion dollar hits to its share price and profits, etc (sales were said to be 2.5 billion per year with 88 million patients). Merck pulled the drug themselves, and are likely now to have to pay out a lot of money in class-action suits.
I think this is the pity - if a patient took the drug for 18 months they had an increased risk of heart attack and a lot of heart attacks were caused by VIOXX, but perhaps faced with the prospect of excruciating pain or an increase in heart attack frequency, I am not sure how I would respond. However, I think I would prefer to have VIOXX available as an option and let me take the risk.
The issue in this particula case was not regulation (though if Merck hadn’t pulled the drug, I suspect it would have been pulled for them), it is risk to the company from litigation from people that have adverse reactions.
James,
I have to disagree. When the drug was “voluntarily” pulled by Elan, two people had just died. As i understand it, progressive multifocal leukoencephalopathy had not previously been recognised as a possible complication/side effect of tysabri. Thus it seemed entirely prudent to pull the drug, so that this side effect could be properly understood, and the danger properly balanced against the potential benefit. When further research was completed, it was found that the risk of PML was sufficiently low that patients be warned about the possible side effect and monitored.
To me, this is gold standard in responsible company, and reasonably flexible regulator.
If you are talking instead about “risk to the company from litigation from people that have adverse reactions”, then this has nothing to do with the FDA. If you sell someone something and don’t give them sifficient warning of the dangers associated with that product, they can sue you. Someone sued McDonalds because they failed to give warning that their coffee was hot. This is the same principle. They will be sued not because of the risk of heart attack, but because they did not include a warning about the risk of heart attack.
In fact the high standard demanded by the FDA has kept such incidences low, beacuse drugs rarely get to market without side-effects being spotted and evaluated, and patients given sufficient warning.